Monday, June 30, 2008

A little more reading on the topic of the "imminent ecological Armageddon" threw up this rather odd article from the Globeandmail.

A curious piece of prose. It may take more than one reading to fully grasp what the author is telling us. The language and imagery used are certainly colourful. The ability to link Galileo with John the Baptist and the Nuremberg trials takes some doing.

Truth may enter the world by many doors, but she is never escorted by force. I thought that was a lesson learned long ago, and learned by none more tellingly than scientists. Real scientists, actually, have learned it. A new amalgam has emerged however, the scientist-activist, and for that specimen it's a lesson passed by.

In the dawn of the Enlightenment, it was scientists who were hauled before tribunals and inquisitions. Galileo is the arch example, the pioneer empiricist who rejected the ancient Earth-centric model of the (then known) universe, and for his pains earned the attention and wrath of the distinctly unscientific Inquisition.

I am drawn to these thoughts, and to the long-decayed example of the Inquisition, by a most curious outburst this week by James Hansen, the principal voice of NASA on the subject of global warming, a man who played – as it were – John the Baptist to Al Gore's messianic teachings on the subject. Dr. Hansen is largely credited with “sounding the alarm” on man-made global warming, and he has been a persistent, high-profile and very aggressive proponent of the cause for over two decades now. Dr. Hansen doesn't take kindly to those who dispute his apocalyptic scenarios. I choose the term, apocalyptic, deliberately. According to Dr. Hansen, mankind may have reached the tipping point with global warming. Should that be the case, wide-scale calamity and catastrophe are inevitable. And should we not have reached the point of absolute crisis, should there be a minuscule interval for the human species to act and avert the very worst, according to Dr. Hansen, what yet remains to be faced is still horrible enough indeed.

Not all the world shares Dr. Hansen's vision of imminent ecological Armageddon. Serious minds, seriously disinterested in the subject, throw up caveats all the time. They question the models of climatological speculation; they question the peculiar mix of man-made and other likely sources of climate dynamics; they question some of the data gathering and some of its interpretation; and they question the very maturity of the highly complex, and experimentally deficient science of global warming itself.

They seriously question, too, the massive policy prescriptions that are being insisted upon as necessary in response to the scientific determinations of man-made global warming. There is lots of room for different, honest opinion on questions so large and complex, questions at the terribly complicated intersection of science, politics and economics.

But, to Dr. Hansen's agitated mind, those who raise such questions, who inject skepticism into the global warming debate, are “deniers.” The word here is becoming commonplace, but it remains a singular slur. A clutch of the global warming believers like to cast all who would argue with them into the polemical pit, the pit being that dissent from orthodox opinion on global warming as the equivalent of Holocaust denial. It is a shameless and vicious tactic, and hardly accords with the nobility that is suppose to drive the conscience of those out to save the planet. Dr. Hansen is overfond of the specious and chilling analogy: He has written of the “crashing glaciers serv(ing) as a Krystal Nacht” and, although he later repented of the metaphor, compared coal trains to “death trains – no less gruesome than if they were boxcars headed to crematoria, loaded with uncountable irreplaceable species.” This week, Dr. Hansen went a step even more noxiously forward.

He called for a tribunal, or as I prefer to call it, an Inquisition, to put on trial for crimes against nature and humanity, the CEOs of the big oil companies who, according to Dr. Hansen's frantic view of things, feed the public “misinformation” about the climate crisis. Again the implicit model is to Nuremberg, as the man attempts to put concern for a future – let us call it a probability – on a moral and factual par with the unquestioned, historical, shattering enormity of the Nazi Holocaust.

Is this a scientist speaking? If so, it is more than curious that in the 21st century it is the scientist calling for the secular equivalent of an Inquisition. More to the point, are these the words of a man really certain of his truth, or one who – with the anxiety of the fanatic – is trying to shield it from all rigour of skepticism and inquiry? In either case, I do not question at all the assertion that it is the voice of a man who is neither a friend to reason or science. This is the voice of the scientist-activist consumed with his own virtue and fearful of all dispute.

Science has no need of tribunals or trials, no need of Nuremberg justice, or analogies with the Holocaust. James Hansen's words this week were an offence, an offence against inquiry, against science, against moral seriousness. They were a piece of insolence against the idea of debate itself.

"Those who speak loudest, the UK and US, Australia, they used to whale before but they couldn't manage their whales, so everything is gone. So they have no interest in this any more," Loftsson told Reuters in an interview.

"This is our meat in the ocean. But in Australia and New Zealand, they walk and farm on land," he added. "They are hypocrites. This is not about the whales, it's about politics."

Loftsson started out as a cook's assistant aboard a whale catcher aged 13 in 1956, and now runs a company that has four 50-metre (164-ft) whaling vessels.

He caught seven fin whales in 2006, which weigh around 40 tonnes on average each, and is hoping Iceland's government will raise its national quota to a total of around 35O whales -- around the number his company's catch averaged per year between 1948 and 1985.

FEEDING JAPAN

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Loftsson says he is resuming exports to Japan, where whale meat is a delicacy offered in restaurants and sold on supermarket shelves. Choice whale meat cuts can retail at US$50 to $100 a kilo (2.2 lb) in Japan.

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"It tastes just like any ordinary, very good red meat. You can eat some of it raw. Depending on which loin (cut) of the whale, whale meat is most like tuna," he added.

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"We were just sitting there," he said. "That's Icelandic politics. There are too many chickens in Iceland's politics, they don't have any guts."

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And aside from dodging the likes of Greenpeace and other anti-whaling enforcers like maritime conservation guerrillas Sea Shepherd Conservation International on the high seas, the biggest challenge he faces as a whaler?

"Whales rot very quickly after they have been shot, so there is a limit how far you can go out and you have to bring it back as quickly as possible," he said.

Thursday, June 26, 2008

By way of explanation of my blogging absence I present a press release on last week's "offshoring" conference at the University of Nottingham featuring none other than Alan Blinder (Princeton) and Elhanan Helpman (Harvard) (who gave the World Economy lecture the evening before on a related topic).

It was interesting to see Alan Blinder present his controversial hypothesis on the potential adjustment costs associated with this "second industrial revolution". However, his analysis seemed to simply repeat what Thomas Friedman wrote about in the "World in flat" a number of years ago and that I read in early 2006. That is not to say he is wrong and it is good that someone is pushing this angle if for no other reason that for academics to take this issue seriously (or not so seriously).

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Sending jobs abroad creates thousands more jobs in the UK

The growing trend for British firms to send jobs overseas has actually helped boost employment in the UK, creating thousands of jobs according to new research.

Economists at the Globalisation and Economic Policy Centre (GEP) at the University of Nottingham say their research contradicts common perceptions that British firms are exporting jobs overseas to India and China simply to cut costs, leaving many here unemployed.

GEP economists analysed data from more than 66,000 UK firms over a period from 1996 to 2005. The results of the study - the largest ever carried out into the offshoring” phenomenon – showed that far from increasing unemployment in the UK, the policy had resulted in the creation of 100,000 extra jobs and an increase of £10bn in company turnover.

GEP Centre Director, Professor David Greenaway said: “People fear their jobs are being exported to countries like India and China where labour is cheaper, but the picture is far more complex than that and much more positive. “It would seem that firms that offshore part of their production process or service provision overseas become more efficient. This boosts productivity and turnover and as a result these firms grow and end up employing more people at home, not fewer.”

But Professor Greenaway said there were losers from the offshoring phenomenon. He said: “Offshoring does lead to increased job turnover and a change in the skill mix in a firm. The winners are those who have the skills required by firms that are offshoring and growing; the losers are those who cannot adapt.

“The lesson for policymakers is that offshoring is to be embraced, not feared, but that we need to continually invest in upgrading the skills of British workers to increase their adaptability and help smooth the transition from one job to another.”The research also exploded another offshoring myth. Report co-author, Dr Richard Kneller said: “The common perception of offshoring is that its largely low paid call centre jobs being exported to lower wage economies like China and India, but that’s not the case.

“If you think of manufacturing and the production of parts, then it is skilled work. If you look at car manufacturing, Ford may make engines at Dagenham but gear boxes in Spain; if you think of Airbus – Britain makes the wings and engines, France the bodies. Most offshoring is actually to similarly developed European nations and the US, where the language skills are better.”

And he said Britain is also a major beneficiary of offshoring. “In the services sector Britain has a reputation for areas like finance and creative media and overseas firms will offshore work in this area to UK firms.”

The GEP research findings are to be presented at a major conference on offshoring to be held at the University of Nottingham later this month, which is expected to attract some of the world’s leading economists and experts on the subject as well as senior figures from the policymaking community.

Notes to editors: This research is presented in a 120 page report: The Economic Impact of Offshoring. A useful 6 page summary has been prepared for the Offshoring Conference (details below) - pdf copies can be emailed on request.

GEP Conference on Offshoring 20th and 21st June.

To be held at the University of Nottingham. The programme starts with a ‘Policy Forum’. Speakers include:

The Aral Sea, once the world's fourth largest lake, has shrunk by 70 percent in recent decades in what environmentalists describe as one of the worst man-made ecological disasters.

Lakes and seas are disappearing around the world, partly as a result of global warming but mainly due to mismanagement of water resources linked to irrigation projects.

Other endangered sites include Central Asia's second-largest lake, Balkhash, as well Lake Chad in Africa and Lake Qinghai, China's largest expanse of inland water.

Below are key facts about the Aral Sea.

* Fifty years ago, the Aral Sea was the world's fourth inland sea, after the Caspian Sea, Lake Superior and Lake Victoria. It started shrinking due to Soviet irrigation projects, its surface area declining by more than 50 percent, to 30,000 square km from 67,000 square km, between 1960 and 1996. The sea level dropped by 16 metres, according to the World Bank.

* The sea straddles the former Soviet Central Asian republics of Kazakhstan and Uzbekistan. It split into a large southern Uzbek part and a smaller Kazakh portion in 1990.

* Central Asia, one of the world's driest regions, has two main rivers, the Syr Darya and the Amu Darya. Both used to feed the Aral Sea. In the 1960s Soviet planners built a network of irrigation canals to divert their waters into cotton fields in Uzbekistan and Turkmenistan, starving the sea of its life blood.

* Mismanagement of land and water resources has caused degradation extending to the entire Aral Sea basin, damaging fish production and causing high salinity and pollution as well as violent sand storms. Fresh water supplies have diminished and human health problems have risen, according to the World Bank.

* Kazakhstan pledged to restore its portion of the Aral Sea when it gained independence from the Soviet Union in 1991.

The Aral Sea region is among the poorest in the oil producing state. At least a quarter of its population lives below the poverty line, and the average monthly income is three times below that of Kazakh financial capital Almaty, according to official data. Average life expectancy is 66 years compared to 70 in Almaty.

* The first phase of a World Bank restoration project is due to be completed at the end of 2008. Total cost is US$86 million, including a US$64.5 million World Bank loan to the Kazakh government.

The aim is to secure the northern Kazakh pocket of the Aral Sea at 42 metres above Baltic Sea level and improve ecological conditions in the area. The project includes construction of the Kok-Aral dike which separates the northern sea from the southern part, and several hydraulic structures on the Syr Darya river.

* The World Bank is considering a follow-up project to improve environmental and economic conditions further, a scheme estimated to cost US$300 million. It includes returning water to the port of Aralsk and nearby villages, rehabilitating delta lakes and improving river flows.

* Similar efforts have been impossible in Uzbekistan, where most river water is still directed to cotton production -- one of the main pillars of the Uzbek economy. The south part continues to shrink. Experts, including the World Bank, doubt the Aral Sea will be ever restored to its original size. (Editing by Catherine Evans)

SIX-MONTH PLACEMENT OPPORTUNITY AT ENVIRONMENT AGENCY IN ENERGY RESEARCH - closing date 30 June As part of its Policy Placement Scheme NERC welcomes applications from researchers interested in developing energy research in the Environment Agency. The placement will be jointly funded by NERC and the Environment Agency, and will be based at the Environment Agency, but the researcher will remain officially employed by his/her institution. See http://www.nerc.ac.uk/using/publicsector/fellowship.asp for details.

BackgroundNERC has recently launched a new 'policy placement' scheme. This allows academic researchers and other staff involved in environmental science research to work closely with policy-makers within government and other organisations in the UK. For further details see http://www.nerc.ac.uk/using/publicsector/placements.asp

Monday, June 16, 2008

George Bush gives it to us straight in the following transcript from the Washington Post.

I will just tell you that unless China and India are at the table, unless they agree to a goal, unless they agree to firm strategies to achieve that goal, then I don't see how any international agreement can be effective. George W Bush, Brdo, Slovenia, 10 June 2008

As part of our economics of fisheries series comes news that the Bluefin tuna might live to fight another day but how many more is hard to predict.

The economics are as always fascinating. What happens when demand increases and the supply falls, of course the price increases - in this case tripling in a year where a SINGLE fish can cost $100,000. Now, what happens when the price rises so dramatically? More fisherman try and catch the remaining few fish. Obviously the fisherman will weigh up the costs of trying to catch the last few fish (fuel, time, opportunity cost etc.) against the price but as long as the price continues to rise this quickly it is not a great time to be a tuna.

This is a classic tragedy of the commons disaster unfolding before our eyes.

BRUSSELS - EU fisheries regulators have banned trawling for bluefin tuna from next week in the eastern Atlantic and Mediterranean to stop overfishing of a species that is approaching stock collapse, the EU executive said on Friday.

Bluefin tuna is prized by sushi lovers and its numbers have fallen due to overfishing by countries hunting it in those waters -- Cyprus, France, Greece, Italy, Malta, Portugal and Spain.

Last year, their combined national fleets caused the EU to exceed its international catch quota by 25 percent. Scientists say bluefin tuna may die out if fishing is not restricted.

But the incentive to catch bluefin tuna remains strong, particularly in June, when around 85 percent of the fish are caught. Since last year, market prices for the delicacy have roughly tripled: in Japan a single fish can cost up to US$100,000.

Bluefin tuna are known for their huge size, power and speed. Maximum weights recorded are in excess of 600 kg.

As of June 16, vessels flying the flags of Cyprus, France, Greece, Italy and Malta will be prohibited from fishing for bluefin tuna in either Mediterranean or eastern Atlantic waters. A similar ban goes into force for Spain on June 23. It was not immediately clear if or when Portugal would be subject to a ban.

The bans apply to vessels that use a "purse seine", a type of net that floats the top of a long wall of netting on the surface while its bottom is held weighted under the water.

The European Commission, the EU executive, regulates fishing quotas for member states and also negotiates international fisheries agreements on their behalf.

"The Commission is determined to use all necessary means to prevent a recurrence of the substantial overfishing seen in 2007," it said in a statement.

"Last year, overfishing was largely driven by the industrial purse seine sector of the fleet, which takes more than 70 percent of the total catch."

France's Agriculture Ministry said minister Michel Barnier had expressed his objection to the decision to the EU and called for a meeting of an expert committee to help clarify the use of quotas in the countries concerned.

Environment group WWF was unimpressed with the later date for Spain's ban and said the poor state of stocks should have prevented trawling this year altogether.

"Overfishing and massive illegal catches threaten the survival of bluefin tuna. Fishing should be banned indefinitely at least during June, the key spawning month for Mediterranean bluefin tuna," Aaron McLoughlin, head of WWF's European Marine Programme, said in a statement.

Commission experts say the EU's fishing capacity is so large and bluefin tuna trawling activity so concentrated in June that the EU quota can be exhausted in just two days of fishing. (Additional reporting by Tamora Vidaillet in Paris; Editing by Alison Williams)

Monday, June 09, 2008

Geoffrey Heal is a respected commentator on the economics of climate change usually from a corporate perspective. He has recently published a NBER working paper that is part meta-analysis and part suggestions for future research.

In addition I have recently been sent Heal's new book "When Principles Pay: Corporate Social Responsibility and the Bottom Line". This is my current academic/leisure reading given its accessible and equation free text.

In the NBER paper a great deal of time is spent looking at the crucial issues of discount rates, uncertainty and risk aversion. The costs of action and inaction are then carefully spelt out. An excellent overview article.

I agree with the very final sentence of the paper:

It is very clear that most of the models analyzed to date are so aggregated as to miss many important issues.

The NBER pitch is as follows:

CLIMATE ECONOMICS: A META-REVIEW AND SOME SUGGESTIONS [NBER]

http://www.nber.org/papers/w13927

ABSTRACTWhat have we learned from the outpouring of literature as a result of the Stern Review of the Economics of Climate Change? A lot. We have explored the model space and the parameter space much more thoroughly, though there are still unexplored regions. While there are aspects of the Stern Review's analysis with which we can disagree, it seems fair to say that it has catalyzed a fundamental rethinking of the economic case for action on climate change. We are now in a position to give some conditions that are sufficient to provide a case for strong action on climate change, but need more work before we have a fully satisfactory account of the relevant economics. In particular we need to understand better how climate change affects natural capital - the natural environment and the ecosystems comprising it - and how these affect human welfare.

Returning again to the book, the content is particularly interesting from a globalisation perspective and motivates a considerable of amount of the research that myself and co-authors are currently investigating.

Stories of predatory lending practices and the reckless destruction of the environment by greedy corporations dominate the news, suggesting that, in business, ethics and profit are incompatible pursuits. Yet some of the worst lenders are now bankrupt, and Toyota has enjoyed phenomenal success by positioning itself as the green car company par excellence. These trends suggest that antisocial corporate behavior has its costs, especially in terms of the stock market, which penalizes companies that have poor environmental track records and rewards more socially conscious brands.

Tuesday, June 03, 2008

The Financial Times today included a supplement called "CLIMATE CHANGE - Part 1: Science"

Parts 2 and 3 will be on "policy" and "business".

As you would expect, the quality of the publication is high with lots of glossy pictures of polar bears, dead animals, cut down forests and squiggly lines.

In the 45 page supplement there are 3 pages given over to the sceptical view with Bjorn Lomborg and Benny Peiser trotted out again neither of which have anything new to say. I covered Peiser in my recent "apocalyptic" posts. This is a reasonable allocation of space and the FT are to be commended on how they have handled the debate.

Cue the lobby groups. At least they have learnt to pick a very big number to get the headlines (as I am depressingly proving). The longer term benefits for the US of being a world leader in green technologies following any imposition of a bill do not get the headlines.

President George W. Bush slammed a U.S. Senate climate change bill set for debate on Monday, saying the measure would cost the American economy $6 trillion. "I urge the Congress to be very careful about running up enormous costs for future generations of Americans," Bush said at a White House meeting on economy and tax cuts. He said the bill, known as the Lieberman-Warner Climate Security Act and set for its first debate on the Senate floor late on Monday, "would impose roughly $6 trillion of new costs on the American economy."

--Deborah Zabarenko, Reuters, 2 June 2008

The case for the defence:

The bill's supporters expected this argument, and maintain the legislation's cap-and-trade provisions would in fact create jobs and that the cost of doing nothing about climate change justifies action now. --Deborah Zabarenko, Reuters, 2 June 2008

Monday, June 02, 2008

As the UK does not have a comparative advantage in the production of wine we tend to import (and then consume) vast quantities of this grape based beverage.

Wine production and marketing is therefore subject to the whims of globalisation, trade barriers, consumer fashions and climate and hence makes it into this blog on numerous grounds. There are indeed academic papers on the impact of climate change on wine production - it is likely to be positive for the UK wine industry as you might expect.

The well respected Economic Journal celebrates the economics of wine with a special issue.

If you are wondering why now the introduction explains:

To coincide with the 150th anniversary of the famous Bordeaux Wine Classification of 1855, the Centre for Policy Evaluation at the University of Nottingham sponsored a special session at the 2005 RES Annual Conference on the economics of wine. The 1855 classification was completed as part of the Paris Exhibition of the same year as a temporary means to determine which Bordeaux wines would be exhibited. The classification took hold, and is still in use today. In celebration, this Feature explores how economics can add to an understanding of wine production and wine markets.

We study whether quality assessments made by wine experts and by consumers (based on prices obtained at auction between 1980 and 1992) can be explained by variables describing endowments (land characteristics, exposures of vineyards) and technologies (from grape varieties and picking, to bottled wines). However, since technological choices are likely to depend on endowments, the effects can only be identified using an instrumental variables approach. We show that technological choices affect quality much more than natural endowments, the effect of which is negligible.

This article looks at the impact of Robert Parker's oenological grades on the so-called en primeur prices of young Bordeaux wines. The Parker grades are usually published in the spring of each year, before the wine prices are established. However, the wine grades for 2003 were published much later, in the autumn, after the determination of prices. This unusual reversal is exploited to estimate a Parker effect which we find to be, on average, worth 2.80 euros per bottle of wine. We also use grade-specific effects to predict what prices would have been had Parker attended the 2003 spring tasting.

Bordeaux wines have been made in much the same way for centuries. This article shows that the variability in the quality and prices of Bordeaux vintages is predicted by the weather that created the grapes. The price equation provides a measure of the real rate of return to holding wines (about 2–3% per annum) and implies far greater variability in the early or ‘en primeur’ wine prices than is observed. The analysis provides a useful basis for assessing market inefficiency, the effect of climate change on the wine industry and the role of expert opinion in determining wine prices.

Perhaps we no longer need to worry about global warming and that Bush was right all along - US technological expertise will "step up to the plate" and save the planet.

As always, things are not so simple. I could list the "economic flaws" but I am sure they are all too apparent.

I suppose the question as a non-scientist is once the CO2 has been sucked out of the air where does it go? Secondly, how many of these machines would be needed to suck all of the US' yearly emissions, how much land would be needed and how much energy would be employed to make the machine in the first place. I suspect it just won't add up.

Scientists say they have invented a machine that can suck carbon dioxide out of the air – potentially creating a vital weapon in the war against global warming.

The blueprint for the CO2 'scrubber' raises the prospect of a generation of machines which would help reduce the billions of tonnes of greenhouse gases being pumped into the atmosphere by the use of fossil fuels.

The team of US scientists now plans to build a prototype which would capture one tonne of CO2 from the air every day.

Though the idea is considered a holy grail in the battle against climate change – and Sir Richard Branson has put up £12.6 million for anyone who makes it a reality – the machines would fall far short of a quick fix.

The prototype, being built at a laboratory in Tucson, Arizona, by a company called Global Research Technologies, will cost about £100,000 and take about two years to construct.

The devices – each nearly the size of a shipping container - would have to be produced in their millions to soak up human carbon emissions.

The idea is bound to be controversial, with environmentalists seeing so-called technological solutions to global warming as undermining attempts to promote greener lifestyles and industries.

But physicist Klaus Lackner, who led the U.S. team behind the invention, said the CO2 scrubber offered more hope than current efforts to cut carbon emissions by reducing fossil fuel use.

' I'd rather have a technology that allows us to use fossil fuels without destroying the planet, because people are going to use them anyway,' he said.

Scientists say it is not difficult to remove carbon dioxide from the atmosphere by absorbing it in various chemical filters. But the problem has been how to clean those filters of CO2 so they can then be reused to carry on the job.

Professor Lackner, of New York's Columbia University, says the solution lies in a newly discovered property of absorbent plastic sheets known as 'ion exchange membranes' which are routinely used to purify water.

It turns out that humid air can make these membranes 'exhale' the CO2 they have trapped – leaving them clean and ready to absorb another load.

The Lackner team says the captured carbon dioxide could then be pumped into greenhouses to boost plant growth.

About me

This blog is written by Professor Rob Elliott, an academic economist, with an interest in all things international and environmental..I am currently a Professor of International and Environmental Economics at the University of Birmingham..Find me at my homepage.

This weeks read

Following the recent workshop on the "Economics of the Stern Review" and the fuss caused by the "great global warming swindle" this book represents an excellent introduction to the topic. Chapter 6 is the chapter it all hinges upon.